Where Are the Local Stimulus Packages?

1.21.09

Add California to the list of states that “see renewable energy as their future,” as the LA Times reported earlier this month. Our employment figures are down on a net basis, but renewable energy and energy efficiency remain bright spots in an otherwise maudlin economy.

“Some states — including Michigan — already see renewable energy as their future: It’s the only sector that appears to be making room for more employees despite the recession.” Los Angeles Times, January 4, 2009.

With President Obama now inaugurated and many states already working on climate change mitigation plans, 2009 will be the year to turn the rhetoric of the green energy revolution into reality. He stated on the campaign trail: “Breaking our oil addiction . . . is going to take nothing less than the complete transformation of our economy.”

Now he’s doing more than talk; he has already presented his stimulus package to Congress, calling for over US $800 billion in tax cuts and incentives for infrastructure and — most importantly, from my perspective — US $15 billion in various incentives for renewable energy, better transportation and energy efficiency. Obama has said repeatedly that the need for action on climate change and energy independence is urgent. And he recognizes that strong action to mitigate these problems will also provide a substantial boost to our economy, helping to address the current economic slump.

By my count, that’s at least three birds with one stone: climate change, energy independence and a major boost to the economy.

The obvious follow up question: if this equation holds true at the federal level, why not at the state and local levels? A clear difference between the federal, state and local levels is that authority to exceed budget limits in any given year is more restricted for state and local governments than it is for the federal government. But there are many ways to follow Obama’s lead without breaking state and local coffers, even on a temporary basis.

One way states can provide a boost is through enacting aggressive renewable energy standards. California already has one of the most aggressive in the country, with investor-owned utilities required to obtain 20 percent renewables by 2010. More than half the states now have these mandates. But there’s a dark secret behind these mandates: most of them aren’t really mandates. Rather, they’re mandates with “weak teeth” because there are often loopholes or soft penalties for non-compliance.

California’s mandate comes with a three-year leeway — until 2013 — before penalties are even allowed. And the penalties that can be applied cap out at only US $25 million per utility per year. For businesses as large as Pacific Gas & Electric of Southern California Edison, this isn’t a large penalty.

Last, commissioners are often too friendly with the utilities they regulate. For California (the state I know most about), I am of the view that it’s unlikely the current Public Utilities Commission will apply penalties for utility non-compliance. But I hope we won’t even come to that juncture, due to utilities complying with the mandate instead of courting penalties.

A much better way to avoid the whole debate over mandates and penalties is for states to enact “must take” laws for renewable energy. Generally labeled “feed-in tariffs,” these laws require utilities to buy renewable energy offered at or below a price set by regulators. This is an overtly non-free market policy, but it can make sense (as discussed in my previous column) as a kick start for an industry that will ultimately pay for itself many times over.

As I wrote previously, even if ratepayers end up subsidizing feed-in tariffs for a few years, the direct and economic benefits from reduced natural gas prices, climate change mitigation, job creation and a host of other benefits, will very likely outweigh the costs in a relatively short time. California and many other states are currently considering enacting European-style feed-in tariffs that should provide a serious boost for renewables.

Even closer to the ground, local governments can do a lot independent of state and national policies. Local governments are major employers and major energy users, so if they change their own energy consumption habits this will have an impact. By setting goals for energy conservation and greenhouse gas emissions reductions, local governments not only save money themselves, they also set an example for individuals, businesses and others in their jurisdictions. We are recommending that local governments in our region commit to becoming “carbon neutral” by 2020, as a way to save money and to set an example.

Local governments can also enact their own building energy efficiency standards. By doing so, they can spur local investment in energy efficiency projects, creating jobs and leading to cost savings for homeowners and businesses through energy savings.

Beyond their own consumption patterns and building codes, local governments can take the reins more firmly and become power providers. There are various ways to do this, but the two most viable options are by becoming a municipal or public utility district (which can, confusingly, include county governments as partners) or through Community Choice Aggregation.

Municipal utility districts are very hard to create because they invite long and expensive legal battles with the local investor-owned utility company (such as PG&E or Edison in California). Very few new municipal utility districts have been created in recent decades as a result.

The Community Choice Aggregation (CCA) law was enacted in 2002 as a middle ground solution between full municipal utility control and full investor-owned utility control. Under CCA, cities and counties can choose to buy or build energy facilities on behalf of their residents. It’s that simple. The investor-owned utility district still ships the power over their own transmission lines and still bills the customers. The investor-owned utility doesn’t even lose any money because they don’t, in states like California that have “de-coupled” profits from actual sales of power, make money on power sales. They make money on infrastructure like transmission lines.

The primary benefit of CCA is that it provides a choice over what types of power a given region receives. A region could choose to get 100 percent renewable energy — far beyond anything the private utilities will provide. Another benefit is that public entities like a CCA organization have access to much cheaper money than investor-owned utilities. In other words, the cost of borrowing money is far lower. And nor do they have to make a profit or pay taxes, as investor-owned utilities do.

Last, by choosing to build renewables under CCA, local governments can provide jobs and local infusions of capital that will help kick start local economies more generally. Accordingly, CCA should be considered by every region in California, and other states that have their own CCA laws, such as Massachusetts, Ohio and New Jersey.

Beyond renewable energy, there are tremendous savings and greenhouse gas emission reductions available through better mass transit and transportation policies more generally. These include better bus systems, more carpool lanes, ridesharing options, bike lanes and many other policies that can be enacted locally. More cutting edge options include creating a charging infrastructure for the coming new generation of electric vehicles and plug-in hybrid vehicles, led by companies like Better Place.

The bottom line is that we know renewable energy and less carbon-intensive transportation are the waves of the future. And we know that by riding these waves, all parts of our country may benefit economically through job creation and other economic benefits. At the same time, we will be working toward lowering our greenhouse gas emissions and enhancing our energy independence.

So why aren’t we doing it already? The problem is that local elected officials are not being pressed enough on these issues. The truths I’ve outlined above are starting to percolate into the public consciousness, but slowly. We all need to do our part by spreading the word about the nexus between economic growth and renewable energy — and, in particular, let your elected officials know you want them to take action.

Tam Hunt is Energy Program Director and Attorney for the Community Environmental Council in Santa Barbara. See www.cecsb.org for our regional energy blueprint. He is also a Lecturer in renewable energy law and policy at the Bren School of Environmental Science & Management at UC Santa Barbara.

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